Edu-Regulating Consumers Through Access to Financial Advice

Abstract

“Edu-regulating consumers through access to financial advice” introduces the third edu-regulatory programme on consumer financial education. It examines the development of a regulatory framework for the provision of financial advice. The chapter shows how legal reforms and changes to the regulatory framework for the provision of financial advice facilitated the democratisation of financial knowledge. Specifically, it describes how the UK government and the FCA have created two distinct legal regimes for the provision of financial advice. Reforms of the regime for regulated financial advice were largely inspired by many mis-selling scandals that caused significant consumer detriment. Therefore, to protect consumers from the provision of poor or low-quality financial advice, the FCA has imposed certain restrictions on and requirements for financial advisors. This reformed market for regulated financial advice was later used by the financial regulator as an important measure of consumer protection. Identifying certain financial markets as complex and particularly risky to consumers, the FCA has made the provision of regulated financial advice to consumers compulsory.In addition to that, concerns over consumer financial exclusion have galvanised and inspired the creation of a different legal regime for the provision of generic financial advice which was not regulated. To respond to problems of lack of or inadequate engagement with financial markets as well as people’s financial poverty, the UK government and the FCA created the Money Advice Service (MAS). As a part of the new regulatory framework for the provision of generic financial advice, the MAS was expected to integrate more consumers into the financial services market. Free of charge and easily available access to financial advice was seen to shape consumer need for financial products and nudge them towards certain financial decisions. The development of both regulatory regimes on the provision of financial advice, it is argued, is legitimised by discourses concerning consumer financial illiteracy. In other words, the democratisation of regulated as well as generic financial advice is by and large supported and justified by the need to influence and perhaps change the ways in which consumers interact with financial markets. The chapter suggests that both regulated and deregulated models represent a decontextualised understanding of people’s financial decision-making. These regimes embody an assumption that consumer access to expert advice or greater integration into financial markets would empower consumers and help them enjoy the advantages of financialisation. This regulatory approach is exclusively designed to address consumer informational vulnerability. However, this perspective on consumer decision-making ignores and fails to properly account for factors other than financial information and financial knowledge that often determine people’s choices. As such, this mis-conception of consumer financial decision-making used by both regimes exposes serious limitations to effective consumer protection via democratised access to financial advice.